Chicago, Ill., Feb 14, 2006 / 12:00 am (CNA).- Catholic hospitals in Illinois have come under sharp criticism with a recent ad campaign, which alleges that they are not meeting the obligations to maintain their tax-exempt status.

Hospitals — both Catholic and other nonprofit hospitals — in Illinois have been accused of aggressive collection practices and for charging higher rates to the uninsured than to Medicare recipients and to individuals with private insurance, reported the Chicago Sun-Times.

As a result, Attorney General Lisa Madigan is supporting legislation that would set standards for charity care and billing-and-collection practices for nonprofit and tax-exempt hospitals. She says the hospitals, on average, spend less than 1 percent of their operating costs on charity care.

The Tax-Exempt Hospital Responsibility Act would require nonprofit hospitals to allocate at least 8 percent of their total operating costs to charity care. A separate bill would prohibit aggressive debt-collection practices.

But the critical ad campaign targets Catholic hospitals alone. The Indiana-based Fairness Foundation has invested $140,000 on the ads in Chicago and $90,000 on similar ads that are running in Washington, D.C., reported the Sun-Times.

The broadcast ads state: "It's a sad day when the Illinois attorney general has to tell not-for-profit Catholic hospitals, among others, they aren't doing enough to earn their tax-exempt status. … but as with other immoral actions, apparently the Church needs to be forced by lawyers to do the right thing, to be moral. How sad."

Another ad accuses the hospitals of "putting profit over mission.” It says: “Catholic hospitals need to return to their charitable mission, providing affordable health care, or start paying taxes.”

"Englewood, Blue Island, Marquette Park and other parts of the Chicago area are neighborhoods where the poor live and where Catholic hospitals serve them," he told the Sun-Times.

Illinois Hospital Association spokesman Danny Chun said the ads are a "mischaracterization and misleading.” He said one-quarter of all hospitals in Illinois are Catholic—47 hospitals—and they play a vital role in providing health care to the poor.

Chun’s association joined with the Metropolitan Chicago Healthcare Council in Springfield last week to lobby against the new legislation. They also issued a joint report, which indicates that the new bill would cause 28 money-losing hospitals to lose an additional $158 million a year, and lead 45 more hospitals into deficit. It also states that Illinois hospitals provide $1.2 billion in free care to the poor and the uninsured.